AMES, Iowa -- We know the 2008 floods devastated Iowa, with 83 of the
state's 99 counties being declared disaster areas by Gov. Chet Culver. But what we won't
know for some time is the actual economic impact of those flood-damage
losses, according to a new report by economists from Iowa State University's
Regional Capacity Analysis Program (ReCAP).

The report, "Economic Impacts of the 2008 Floods in
Iowa,"
details how the economic impact of this year's flooding will be calculated.
Once all of the official losses are reported, ISU economists say the total
may approach or exceed the $1.45 billion in losses to crops, livestock, and
personal property/income reported in the 1993 floods. (ISU Professor of
Economics Dan Otto was lead author of that October 1993 report.)

But until the current numbers are in, any early projections putting
losses in the billions of dollars are premature, the ISU economists say.

"We can measure lots of things. What we can't measure is the thing that
people really, really want to know -- and that's the cost to the state in
terms of losses from the flooding," said Liesl Eathington, director of ReCAP
and lead author on the report. "We won't know that until everyone reports
the damage. We also won't know that until some of the (state, federal and
private) aid starts to flow in, which could take months -- or in some cases,
even years."

Expect 1-3 years until the numbers are in

Eathington says economists will rely on government accounts of the
economy, which come out quarterly, but only at the state level and usually
with a one-year lag.

"And so it may be a year, two years, or three before we can actually look
at the overall performance of the economy and figure out what the net effect
was," she said.

Otto's 1993 report also figured in the net effect. Taking into
consideration offsets such as insurance, federal disaster payments and/or
grants, and additional contributions, the report put total net ag losses at
$676 million, net wealth losses at $113.1 million and lost personal income
at $112 million from the '93 floods.

For now, economists can only estimate losses. As an example, the ReCAP
report estimates the loss to farmers from this year's flooding. The USDA
reported that nine percent of corn acres and eight percent of soybeans have
been flooded. Assuming that half of that land is still able to be planted or
replanted into soybeans, then ISU economist Dave Swenson calculated that the
change in anticipated gross sales for Iowa's crop farmers might be as much
as $1.2 to $1.5 billion less than it otherwise might have been in a normal
growing year.

When losses are officially reported and the economists begin to calculate
the full extent of the damage, Eathington points out that the economic
impact may overstate the effects on businesses and understate the effects on
households.

"It's easier to get numbers for businesses because they have those types
of records," Eathington said. "They're more likely to keep track of what
they had and what they lost. It's much harder to get numbers for households.
And in a lot of cases (of people who experienced flood losses), there's no
point in even tallying the household losses because they're not going to be
compensated."

"I would think by next year, when you start looking at business in these
towns that were flooded, you're going to start seeing decline," said Meghan
O'Brien, a ReCAP economist who specializes in retail business. "You might
have a better picture of the overall health than you would with households,
but even then, it's something that will play out over years. So I don't know
that you'll have a firm grasp on actual business loss for a while."

Don't judge economic impact by GDP

In the 1993 floods, real nonfarm Gross Domestic Product (GDP) in Iowa
actually posted a 2.7 percent gain. But the ISU economists warn that it may
be different this time around because the economy was coming out of a
recession in 1993 and could be entering one this summer.

But GDP isn't really a good gauge when it comes to measuring a disaster's
economic impact anyway.

"A contributing reason GDP went up in '93 is because of the rebuilding
and disaster dollars that came into Iowa," Otto said. "These are measured by
GDP and from an aggregate statewide measure, this was an economic stimulus.
On the other hand, there were certainly losses in personal wealth which is
not measured in GDP accounts."

"Caution must be used when looking at GDP growth following a disaster,"
O'Brien said. "It does not capture the whole story nor should it imply that
floods have some net benefit for the economy. Real people, especially those
affected by the floods, can no more feel GDP growth than they can recover
what was lost in the floods."

The ReCAP staff plans to continue analyzing the economic impacts of the
2008 floods to Iowa as data becomes available.

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Eathington

O'Brien

Otto

Swenson

Quick look

A new report by Iowa State University's Regional Capacity Analysis Program (ReCAP)
titled "Economic Impacts of the 2008 Floods in Iowa,"
details how the economic impact of this year's flooding in the state will be calculated.

Quote

"We can measure lots of things. What we can't measure is the thing that
people really, really want to know -- and that's the cost to the state in
terms of losses from the flooding. We won't know that until everyone reports
the damage. We also won't know that until some of the (state, federal and
private) aid starts to flow in, which could take months -- or in some cases,
even years."